<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-KSB/A
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NO. 0-12850
DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-3152648
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6416 VAIEL AVENUE
WOODLAND HILLS, CALIFORNIA 91367
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 381-2700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
REDEEMABLE COMMON STOCK PURCHASE WARRANTS, AND COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended December 31, 1999 were
$38,180,996.
At March 24, 2000, the issuer had 6,497,564 shares of Common Stock, $0.01
par value per share, 2,000 shares of Series A Preferred Stock, $.01 par value
per share, and 2,250 shares of Series B Preferred Stock, $.01 par value per
share issued and outstanding.
The aggregate market value of the outstanding voting and non-voting common
equity held by non-affiliates of the issuer computed by reference to the average
bid and asked price of such common equity as of March 27, 2000 was $14,282,168.
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure format: Yes [ ] No [X]
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PART III
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and executive officers of the Company as of March 31, 2000.
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED
AGE AT OR
MARCH 31, APPOINTED
NAME 2000 DIRECTOR PRINCIPLE OCCUPATION
---- --------- --------- --------------------
<S> <C> <C> <C>
DIRECTORS
Robert H. Gurevitch 58 1996 MR. GUREVITCH has been Chairman of the
Board, Chief Executive Officer and President
of the Company since March 1996, and was
appointed Secretary of the Company in
February 1997. Mr. Gurevitch founded Dental
Medical Diagnostic Systems, LLC ("DMD") in
October 1995 and was its Chief Executive
Officer until it was acquired by the
Company. From November 1994 until February
1995, Mr. Gurevitch served as Chief
Executive Officer of Dycam, Inc., a
manufacturer and marketer of digital
cameras. From 1987 until his retirement in
August 1993, Mr. Gurevitch served as Chief
Executive Officer and Chairman of the Board
at New Image Industries, Inc. ("New Image"),
a manufacturer and distributor of intraoral
cameras.
Marvin H. Kleinberg 72 1996 MR. KLEINBERG has been a Director of the
Company since March 1996. Mr. Kleinberg is a
founding partner of the law firm Kleinberg &
Lerner, LLP, and has been a member of that
law firm and its various predecessors since
1980. Mr. Kleinberg has practiced in the
area of intellectual property law since
1954. Mr. Kleinberg serves as an adjunct
lecturer in Patent Law at the Franklin
Pierce Law Center and is on the advisory
council of the PTC Foundation, which
publishes "IDEA."
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED
AGE AT OR
MARCH 31, APPOINTED
NAME 2000 DIRECTOR PRINCIPLE OCCUPATION
---- --------- --------- --------------------
<S> <C> <C> <C>
Jack D. Preston 66 1997 DR. PRESTON has been a Director of the
Company since February 1997. From February
1997 through December 1998, he served as a
consultant to the Company. Since January
1999, he has served as the Executive Vice
President of Product Development for the
Company. Dr. Preston has been The Don and
Sybil Harrington Foundation Professor of
Esthetic Dentistry at the University of
Southern California School of Dentistry
since 1979 where he was also the Chairman of
the Department of Oral and Maxillofacial
Imaging and the director of Informatics. Dr.
Preston is also currently a Diplomat of the
American Board of Prosthodontics. Dr.
Preston is an international lecturer on
various aspects of dentistry, an author of
three textbooks and numerous articles and
invited chapters, and is widely considered
to be a leading expert on current and future
applications of computer technology in
dentistry.
John A. Khademi 37 1999 DR. KHADEMI has been a Director of the
Company since March 1999. Dr. Khademi has
served as a consultant to the Company since
December 1998. He has had his own practice,
which is limited to Endodontics, since 1994.
Also since 1994, Dr. Khademi has been an
Associate Clinical Professor for the
Department of Maxillofacial Imaging, and a
Co-Director of Dental Informatics, at the
USC School of Dentistry. He has a
Certificate in Endodontics and a Masters in
Digital Imaging.
OTHER EXECUTIVE OFFICERS
Stephen F. Ross 41 MR. ROSS has been the Chief Financial
Officer of the Company since July 1998. From
September 1995 until July 1998, Mr. Ross
served as a Senior Consultant for Kibel
Green Inc., a company that specializes in
turnaround consulting. From 1992 through
1994, Mr. Ross was the Chief Financial
Manager for the Taper Family Trust. From
1987 through 1991, Mr. Ross was the
Co-founder and Chief Financial Officer for
EPI Products, a distributor of personal care
products. Mr. Ross was a Senior Tax Manager
at Touche Ross from 1982 through 1987. He
became a Chartered Accountant in South
Africa in 1982, and a Certified Public
Accountant in California in 1983.
Dewey Perrigo 46 MR. PERRIGO has served as the Company's Vice
President of Sales since March 1996.
Commencing in October 1995, he served in the
same capacity at DMD, LLC. From 1988 through
September 1995, Mr. Perrigo served as the
Director of Sales of New Image.
</TABLE>
52
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<TABLE>
<CAPTION>
YEAR
FIRST
ELECTED
AGE AT OR
MARCH 31, APPOINTED
NAME 2000 DIRECTOR PRINCIPLE OCCUPATION
---- --------- --------- --------------------
<S> <C> <C> <C>
Robert Groner 38 MR. GRONER was named Chief Operating Officer
of the Company on March 8, 2000. Immediately
prior to joining the Company, Mr. Groner
served as Operations Manager at
International Extrusion Corporation, a
manufacturer of extruded aluminum products
for commercial automotive and construction
applications. From September 1986 to May
1999, Mr. Groner was employed by Fansteel
Inc. as the General Manager of its Precision
Sheer Metal, Schulz Products and California
Drop Forge Divisions. Products manufactured
at these locations were used in the
aerospace and medical industries. Mr. Groner
is an alumnus of the Georgia Institute of
Technology and is a member of that
institution's Council of Outstanding Young
Engineering Alumni.
</TABLE>
The Directors hold office until the Annual Meeting of Stockholders next
following their election and/or until their successors are elected and
qualified. Officers are elected by the Board of Directors and serve at the
discretion of the Board.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
executive officers, Directors and persons who own more than 10% of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, Directors and greater-than-ten-percent stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file with the SEC. Based solely on its review of the copies of
such forms received by it and written representations from certain reporting
persons that they have complied with the relevant filing requirements, the
Company believes that during the year ended December 31, 1999, all relevant
Section 16(a) filing requirements were complied with, provided that: (1) with
respect to Robert Gurevitch, Chief Executive Officer of the Company, a Form 5
was filed late, on April 26, 2000 to report the annual changes in beneficial
ownership for the fiscal year ended December 31, 1999; (2) with respect to Dr.
Jack Preston, Executive Vice President of the Company, a Form 5 was filed late,
on April 26, 2000 to report the annual changes in beneficial ownership for the
fiscal year ended December 31, 1999; (3) with respect to Dr. John Khademi,
Director of the Company, a Form 5 was filed late, on April 26, 2000 to report
the annual changes in beneficial ownership for the fiscal year ended December
31, 1999; (4) with respect to Marvin Kleinberg, Director of the Company, a Form
5 was filed late, on April 26, 2000 to report the annual changes in beneficial
ownership for the fiscal year ended December 31, 1999 (5) with respect to Dewey
Perrigo, Vice President of Sales of the Company, no Form 4 was filed to report
the indirect purchase of 5,100 common shares on November 4, 1999 for purchase
price of $2.33 per share; (6) with respect to Dewey Perrigo, Vice President of
Sales of the Company, no Form 5 was filed as of March 31, 2000 to report the
annual changes in beneficial ownership for the fiscal year ended December 31,
1999; (7) with respect to Stephen F. Ross, Chief Financial Officer of the
Company, no Form 5 was filed as of March 31, 2000 to report the annual changes
in beneficial ownership for the fiscal year ended December 31, 1999; (8) with
respect to Dr. Jack Preston, Executive Vice President of the Company, a Form 4
was filed late, on January 13, 2000, to report the purchase of 2,000 common
shares on November 3, 1999 for purchase price of $2.846 per share; (9) with
respect to Dr. John Khademi, Director of the Company, a Form 4 was filed late,
on January 13, 2000, to report the purchase of 5,000 common shares on November
9, 1999 for purchase price of $2.625 per share. The Company has received no
other information with respect to any required filings by its executive
officers, Directors, and/or any greater-than-ten-percent stockholders of any
class of its securities.
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ITEM 10. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Effective April 1997, the Company agreed to compensate each of its
Directors who are not Officers of, or otherwise employed by, the Company
("Independent Directors") in the form of a $500 fee for their personal
attendance at formal meetings of the Board of Directors. No compensation is paid
for telephonic meetings. No payments were made to the Directors, as a group, for
Board meeting attendance in 1999. In addition, the Company pays all expenses
incurred by its Directors for travel, etc. which are directly related to Company
business and are within the scope of their positions with the Company, and
grants options to each of its Directors, as compensation for serving as
Directors.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation paid
by the Company during the last three fiscal years to Robert H. Gurevitch, the
principal executive officer of the Company, to each of the Company's most highly
compensated executive officers whose salary and bonus exceeded $100,000 during
such year, and to other significant employees.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ------------------------- -------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING LTIP OTHER
SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (2) AWARD(S) (#) ($) ($)
--------------------------- ---- -------- ----- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Gurevitch(1)........ 1999 $300,789 -- -- -- 50,000 -- --
Chairman of the Board of 1998 286,000 -- -- -- 40,000 -- --
Directors, Chief Executive 1997 250,885 -- -- -- 50,000 -- --
Officer, President and
Secretary
Dr. Jack P. Preston(3)........ 1999 $197,950 25,000
Director Executive Vice
President
Dewey Perrigo(1).............. 1999 $162,120 -- -- -- 15,000 -- --
Vice President of Sales 1998 156,000 -- -- -- 20,000 -- --
1997 137,308 -- -- -- 25,000 -- --
Stephen F. Ross(4)............ 1999 $149,520 -- -- -- 30,000 -- --
Chief Financial Officer 1998 51,823 35,000
</TABLE>
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(1) For a description of employment agreements between these executive officers
and the Company, see "Employment Agreements with Executive Officers" below
this table.
(2) Certain of the officers of the Company routinely receive other benefits from
the Company, including travel reimbursement, the amounts of which are
customary in the industry. The Company has concluded, after reasonable
inquiry, that the aggregate amounts of such benefits during fiscal 1999, did
not exceed the lesser of $50,000 or 10% of the compensation set forth above
as to any named individual.
(3) Dr. Preston was appointed to the position of Executive Vice President
effective January 4, 1999.
(4) Mr. Ross was appointed Chief Financial Officer in July 1998. Effective
January 1, 2000, Mr. Ross' annual salary has been increased to $190,000.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company and Mr. Gurevitch have entered into an agreement whereby Mr.
Gurevitch has agreed to serve as Chairman of the Board of Directors and Chief
Executive Officer of the Company until September 30, 2003. Mr. Gurevitch's
agreement provides for compensation including salary at a minimum annual base
compensation rate of $298,000, adjusted pursuant to the Consumer Price Index
annually starting July of 2000, a car allowance and life insurance policy
payable to Mr. Gurevitch's estate and a standard benefits package. Pursuant to
the terms of his agreement, Mr. Gurevitch may not have any ownership interest,
or participate in
54
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any way, in any venture which competes with the Company for a period of three
"years after the termination of the agreement; provided, however, that the
Company must pay Mr. Gurevitch a fee of $100,000 annually for each of the three
years in consideration for this non-competition agreement.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding grants of
stock options made during the fiscal year ended December 31, 1999 to the
executive officers named in the Summary Compensation Table ("Named Executive
Officers"). The Company did not grant any stock appreciation rights in 1999.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
NUMBER PERCENT OF TOTAL
OF OPTIONS GRANTED
SECURITIES TO EMPLOYEES IN
UNDERLYING FISCAL YEAR ENDED EXERCISE OR MARKET PRICE
OPTIONS DECEMBER 31, BASE ON DATE EXPIRATION
NAME GRANTED 1999 PRICE ($/SH) OF GRANT DATE
---- ---------- ----------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Robert H. Gurevitch............... 50,000 12.22% $2.00 * 11/10/2009
Dr. Jack Preston.................. 25,000 6.11% $2.00 * 11/10/2009
Dewey Perrigo..................... 15,000 3.67% $2.00 * 11/10/2009
Stephen F. Ross................... 30,000 7.33% $2.00 * 11/10/2009
</TABLE>
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* Unless otherwise indicated, all options were granted at fair market value on
the date of grant in accordance with the Company's 1997 Stock Incentive Plan.
Fair market value is the average of the bid and asked price for the Common
Stock on the trading day prior to grant on the Nasdaq SmallCap Market
The following table sets forth, for those Named Executive Officers who held
stock options at fiscal year end, certain information regarding the number of
shares of Common Stock underlying stock options held at fiscal year end, and the
value of options held at fiscal year end based upon the closing market price of
the Common Stock at December 31, 1999 on the Nasdaq SmallCap Market.
AGGREGATED FISCAL YEAR END OPTION EXERCISES AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE DECEMBER 31, 1999 AT DECEMBER 31, 1999
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#)(1) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Gurevitch............ -- -- 33,120 112,000 $14,400 $140,625
Dr. Jack Preston............... -- -- 23,760 37,240 -- 70,313
Dewey Perrigo.................. -- -- 48,133 46,000 -- 42,313
Stephen F. Ross................ -- -- 7,000 58,000 -- 84,375
</TABLE>
- ---------------
(1) No options were exercised in fiscal year 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 15, 2000 certain information
relating to the ownership of each series of the Company's equity securities by
(i) each person known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of the class of equity security, (ii) each of the
Company's Directors, (iii) each of the Company's Named Executive Officers, and
(iv) all of the Company's executive officers and Directors as a group. Except as
may be indicated in the footnotes to the table and subject to applicable
community property laws, each of such persons has the sole voting and investment
power with
55
<PAGE> 7
respect to the shares owned. Unless otherwise indicated, the address for each of
the principle stockholders is c/o Dental/Medical Diagnostic Systems, Inc., 6416
Variel Avenue Woodland Hills, California 91367.
<TABLE>
<CAPTION>
NUMBER OF SHARES
TITLE OF CLASS NAME BENEFICIALLY OWNED(1) PERCENTAGE(1)
-------------- ---- --------------------- -------------
<S> <C> <C> <C>
Common Stock Robert H. Gurevitch(2)................... 673,998 10.3%
Common Stock Marvin H. Kleinberg(3)................... 16,457 *
Common Stock Dewey Perrigo(4)......................... 139,564 2.1%
Common Stock Jack D. Preston(5)....................... 36,260 *
Common Stock Stephen F. Ross(6)....................... 11,500 *
Common Stock John A. Khademi(7)....................... 21,390 *
Common Stock Robert Groner............................ --
Common Stock J. Steven Emerson(8)..................... 414,034 6.2%
1056 Ilona Avenue, Los Angeles, CA 90064
Common Stock AMRO International, S.A.(9).............. 1,355,246 17.3%
Grossmuensterplatz 6,
Zurich, CH 8022 Switzerland
Common Stock The Endeavor Capital Fund, S.A.(10)...... 345,661 5.1%
14/14 Divrei Chaim Street,
Jerusalem, 94479 Israel
Common Stock Esquire Trade & Finance, Inc.(11)........ 582,740 8.2%
P.O. Box 2154, Baar, CH 6342 Switzerland
Common Stock Austinvest Anstalt Balzers(12)........... 582,740 8.2%
Landstrasse 938, 9494 Furstenturns,
Balzers, Liechtenstein
Common Stock Leval Trading(13)........................ 261,396 3.9%
c/o Thierry Vegmann, 14 Rue du Conseil
General, 1205 Geneva, Switzerland
Common Stock All Officers and Directors as a Group.... 899,169 13.5%
(7 Persons)(14)
Series A Exchangeable AMRO International, S.A.................. 700 35%
Preferred Stock
Series A Exchangeable The Endeavor Capital Fund, S.A........... 500 25%
Preferred Stock
Series A Exchangeable Esquire Trade & Finance, Inc............. 400 25%
Preferred Stock
Series A Exchangeable Austinvest Anstalt Balzers............... 400 20%
Preferred Stock
Series B Exchangeable AMRO International, S.A.................. 1,000 44.4%
Preferred Stock
Series B Exchangeable Esquire Trade & Finance, Inc............. 350 15.6%
Preferred Stock
Series B Exchangeable Austinvest Anstalt Balzers............... 350 15.6%
Preferred Stock
Series B Exchangeable Leval Trading............................ 300 13.3%
Preferred Stock
Series B Exchangeable The Keshet Fund, L.P..................... 150 6.7%
Preferred Stock
</TABLE>
56
<PAGE> 8
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* Less than one percent.
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Pursuant to the rules of the Securities and
Exchange Commission, shares of Common Stock which an individual or group
has a right to acquire within 60 days pursuant to the exercise of options
or warrants are deemed to be outstanding for the purpose of computing the
percentage ownership of such individual or group, but are not deemed to be
beneficially owned and outstanding for the purpose of computing the
percentage ownership of any other person shown in the table.
(2) Includes 33,120 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of March 31,
2000.
(3) Includes 12,457 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of March 31,
2000.
(4) Includes 48,133 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of March 31,
2000.
(5) Includes 23,760 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of March 31,
2000.
(6) Includes 7,000 shares of Common Stock underlying options, and 4,500 shares
of Common Stock underlying warrants, which were exercisable on or which
will become exercisable within 60 days of March 31, 2000.
(7) Includes 13,890 shares of Common Stock underlying options which were
exercisable on or which will become exercisable within 60 days of March 31,
2000.
(8) Includes 100,000 shares of Common Stock underlying Common Stock purchase
Warrants issued in a debt placement and 78,000 shares of Common Stock
underlying an aggregate of 78,000 of the Company's Redeemable Common Stock
Purchase Warrants which were exercisable on or which will become
exercisable within 60 days of March 31, 2000.
(9) Consists of 700 shares of Series A Exchangeable Preferred Stock, 1,000
shares of Series B Exchangeable Preferred Stock and Warrants to purchase
214,000 shares of Common Stock. On April 15, 2000, the shares of Series A
Exchangeable Preferred Stock held by AMRO International, S.A. were
exchangeable into 469,925 shares of Common Stock, and the shares of Series
B Exchangeable Preferred Stock held by AMRO International, S.A. were
exchangeable into 671,321 shares of Common Stock.
(10) Consists of 500 shares of Series A Exchangeable Preferred Stock and
Warrants to purchase 10,000 shares of Common Stock. On April 15, 2000, the
shares of Series A Exchangeable Preferred Stock held by The Endeavor
Capital Fund, S.A. were exchangeable into 335,661 shares of Common Stock.
(11) Consists of 400 shares of Series A Exchangeable Preferred Stock, 350 shares
of Series B Exchangeable Preferred Stock, Warrants to purchase 78,000
shares of Common Stock and 1,250 shares of Common Stock. On April 15, 2000,
the shares of Series A Exchangeable Preferred Stock held by Esquire Trade &
Finance Inc. were exchangeable into 268,528 shares of Common Stock, and the
shares of Series B Exchangeable Preferred Stock held by Esquire Trade &
Finance Inc. were exchangeable into 234,962 shares of Common Stock.
(12) Consists of 400 shares of Series A Exchangeable Preferred Stock, 350 shares
of Series B Exchangeable Preferred Stock, Warrants to purchase 78,000
shares of Common Stock and 1,250 shares of Common Stock. On April 15, 2000,
the shares of Series A Exchangeable Preferred Stock held by Austinvest
Anstalt Balzers were exchangeable into 268,528 shares of Common Stock, and
the shares of Series B Exchangeable Preferred Stock held by Austinvest
Anstalt Balzers were exchangeable into 234,962 shares of Common Stock.
(13) Consists of 300 shares of Series B Exchangeable Preferred Stock and
Warrants to purchase 60,000 shares of Common Stock. On April 15, 2000, the
shares of Series B Exchangeable Preferred Stock held by Leval Trading were
exchangeable into 201,396 shares of Common Stock.
57
<PAGE> 9
(14) Includes 138,360 shares of Common Stock underlying options, and 4,500
shares of Common Stock underlying warrants, which were exercisable on or
which will become exercisable within 60 days of March 31, 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, the Company entered into an agreement with Boston
Marketing Company, Ltd. ("Boston Marketing") pursuant to which the Company
obtained worldwide marketing rights in the dental market for the CCU processor
and the CCD chip (together, a "Teli Unit") used in the Company's TeliCam System
as well as the right to use the "TeliCam" trademark. At the time the Company
entered into this agreement, Hiroki Umezaki was an officer, Director and
principal stockholder of the Company and is a substantial stockholder and the
President of Boston Marketing. Mr. Umezaki is no longer an affiliate or a
Director of the Company. At December 31, 1999, the Company owed no moneys to
Boston Marketing in connection with Teli Units purchased by the Company prior to
that date. During the year ended December 31, 1999, the Company purchased 2,263
Teli Units at an aggregate cost of $1,577,149 from Boston Marketing.
The Company also has an agreement with Mr. Umezaki pursuant to which he
receives a 15% commission on all sales made by the Company in Asia, except Japan
in which his commission is 12%. Mr. Umezaki earned $402,479 in commissions for
the year ended December 31, 1999.
During the fiscal year ended December 31, 1999, the Company purchased fewer
than 2,500 units under its distribution agreement with Boston Marketing. Boston
Marketing has refused to accept a subsequently placed order. On April 7, 2000
Boston Marketing filed suit in Los Angeles Superior Court alleging breach of
contract and seeking unspecified damages. The Company is investigating the
allegations and has not yet responded to the suit. The Company intends to defend
the action vigorously and believes that it has meritorious defenses to this
suit. Management believes that, if necessary, other CCD chips, CCU processors
and frame grabbers could be obtained from third-party suppliers on comparable
terms, although a disruption in supplies of components could extend for several
months, which could materially adversely affect the Company's operating results.
In addition, if the Company were forced to seek supplies of CCD chips, CCU
processors and frame grabbers not manufactured by Teli, the Company may not be
able to market the units incorporating those CCD chips, CCU processors and frame
grabbers under the "TeliCam" trademark which could materially adversely affect
the Company's operating results.
Mr. Gurevitch and Mr. Umezaki have guaranteed the performance by the
Company under the Company's leases for its Irvine and Westlake premises. The
Company intends to attempt to obtain releases from the recipients of each of
these guarantees and it is possible that the elimination of the availability of
these guarantees may require the Company to post collateral or incur increased
expense.
On May 27, 1997, the Company loaned approximately $126,000 to Dewey
Perrigo, an officer of the Company, and Andrea Niemiec-Perrigo, who was then an
employee but who is no longer employed by the Company, for the purposes of
buying a home. The Promissory Notes evidencing such loan bear interest at prime
plus .25% (8.0%) at December 31, 1999 and are due and payable on November 30,
2002. On August 19, 1998, a principal payment of $56,000 and an interest payment
of $6,152 were made leaving a loan balance of $70,000.
The Company has adopted a policy whereby all future transactions between
the Company and its officers, Directors, principal stockholders or affiliates
will be approved by a committee of the Board of Directors, a majority of the
members of which will be independent Directors, or, if required by law, a
majority of disinterested Directors, and will be on terms no less favorable to
the Company than could be obtained in arm's length transactions from
unaffiliated third parties.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10KSB/A
to be signed on its behalf by the undersigned thereunto duly authorized in the
City of Los Angeles and State of California on the 1st day of May, 2000.
DENTAL/MEDICAL DIAGNOSTIC
SYSTEMS, INC.
By: /s/ ROBERT H. GUREVITCH
-------------------------------------
Robert H. Gurevitch
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons in the capacities and
on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman, Chief Executive May 1, 2000
- -------------------------------------------------------- Officer, and Director
Robert H. Gurevitch
* Executive Vice-President May 1, 2000
- -------------------------------------------------------- and Director
Jack D. Preston
* Chief Financial Officer, May 1, 2000
- -------------------------------------------------------- Principal Accounting Officer
Stephen F. Ross
* Director May 1, 2000
- --------------------------------------------------------
Marvin H. Kleinberg
* Director May 1, 2000
- --------------------------------------------------------
John A. Khademi
*By: /s/ ROBERT H. GUREVITCH
- --------------------------------------------------------
Robert H. Gurevitch
Attorney-in-Fact
</TABLE>
62
